Should You Sell Your Car? 8 Reasons You Absolutely Should…

Have you ever, at some point in your life, thought that you should probably sell your car?? Maybe you just hate it because it’s breaking down all the time, or maybe the payments are just too astronomical for you to afford each month. Whatever the case may be, the question of “Should you sell your car?” has been on your mind. It’s time to figure it out once and for all.

Should You Sell Your Car? 8 Reasons You Absolutely Should

There are seven reasons you should sell your car. If, when you read any one of these reasons and you start nodding your head in agreement, then you should absolutely sell your car. No cold feet, no second guessing, just sell your car.

1) Your car is worth more than 25% of your annual salary

If you earn $50,000 a year and your car is worth $30,000, that is absolute insanity! A more expensive car means:

higher insurance costs

more depreciation (ie. you’re losing money every time you drive your car. The more expensive the car, the more money you’re losing)

higher maintenance costs (even if your car is new, something WILL break…it’s just what cars do)

I’m pretty strict. For me an my family, we make a point not to have our cars worth more than 10% of our annual income. (What can I say? I’m just not big on throwing my money down the toilet with every car purchase!). But, I understand that some people are more into their cars than I am and want something that’s reliable and looks nice. For that reason, I put this benchmark at 25%.

So, if you’re earning $50,000 like we mentioned before, then your car should be worth no more than $12,500.

If your car is worth more than that…should you sell your car? Absolutely. It’s killing you from every angle.

2) You’re severely in debt and can’t get out in less than 2 years

Let’s say you’re $80,000 in debt and earn just $50,000 a year. At best, you’ll be able to work yourself out of debt in three years…but it will probably take even longer than that. Something’s got to give…and that something is your car!

According to a recent CNBC report, the average new car loan today is $31,000 and the average used car loan is in the ballpark of $20,000… Yikes! That means that of the $80,000 in debt we’re talking about above, it’s likely that at least $20,000 of it is on your car!

If you sell it and buy a beater (temporarily while you work yourself out of your mess), your total debt will come down to $60,000. Work an extra job and you’ll likely be able to get that taken care of in less than two years and then you can start investing for your future retirement!

So why is 2 years the magic number? Multiple reasons:

Any longer than that and you’ll probably give up on your debt and just wave the white flag…thereby staying in debt and being broke forever

It’s fast enough that you can ignore all investing during that time and not hurt your future retirement too badly

Even if you can trudge through your debt for years and years, it’s going to do nothing for your moral. It’s best to just rip off that band-aid and get out of debt immediately!

3) The payment is killing you

In that same CNBC report, they listed the average payments on the new and used car notes as well:

Avg. new car payment = $515/month

Avg. used car payment = $371/month

Isn’t that just crazy?! If your car payment is more than 10% of your take-home pay each month, ditch the car. It’s just not worth the stress!

Let’s say that after taxes and insurance are taken out of your check, you’re bringing home $3,000 a month. If your car payment is more than $300, I’d say list that thing on Craigslist by the end of the week.

I mean think about it. Your car payment is 10% of your take-home pay, your housing is probably 30% or more, and then you’ve got food, utilities, gas, maintenance, clothing, phone bills…. You just can’t possibly make all those payments!

So should you sell your car because the payment is more than 10% of your take-home pay? Hands-down I vote yes. Hopefully you do to! After all, it’s your life that this stupid car is killing!

4) High insurance costs

The average driver pays $815 a year in car insurance. But, if you drive a car with one of the makes listed below, chances are that your car insurance is higher than the norm.

Nissan

Lexus

Audi

Infinity

Mercedes

Tesla

AND, if your car is so expensive that you weren’t able to pay cash for it, then you’re likely paying for full-coverage insurance because your lender required it. So, not only are you getting screwed with unusually high insurance because of the kind of car you drive, you’re paying even more because you made a dumb choice buying that way too expensive car.

Should you sell your car if the insurance costs are killing you? I would. It’s just not worth all that money you’re forking over.

5) It’s an absolute lemon

How much do you figure you spend each year on your car? Be careful with this one… Yes, you may have spent $1,500 on your transmission this year, but what about over the past five years? Did you have any other major repairs?

After shelling out a ton of money on our cars, it’s easy for us to:

call it a lemon,

head to the car lot,

trade it in, and then

buy something that’s way more “reliable” (ie. shiny).

I’ve seen this too many times… and then guess what happens to that new “reliable” car?

It breaks down…typically just weeks after buying it.

In retrospect, you would have been better off with your old car that had the new transmission and probably would have lasted you another decade.

Be honest with yourself. Is your make and model typically a quality vehicle? After this big repair, is it likely to last you a very long time?

If the answer is yes, hold onto it BUT, if you’ve spent a thousand bucks each year for the last three years….then yeah, it’s time to get rid of that piece of crap.

6) The repair will cost enough to buy a better car instead

Here’s a common saying that I’m sure you’ve heard:

“If a car costs more to repair than it’s worth, don’t do it.”

It sounds like solid advice, but I wholeheartedly disagree. Here’s why.

Let’s say your car is worth $800. It’s about 10 years old, it’s a little rusty, and it has 150,00 miles on it. It’s always been good to you, but now it needs a new water pump and timing belt. The total cost of the repair is $900. According to the rule of thumb above, you should junk the car and buy something else instead.

So… that car that’s always been good to you and will likely last you 50,000 more miles if you just put $900 into it…you’re supposed to get rid of it and buy a $900 car that you know nothing about?

That new-to-you car could have been in a flood, the transmission could be slipping, or it might have an engine issue that the seller is hiding…

If it were me in this situation, I’d rather keep the car that I know inside and out vs. the one that I’m guessing is a good one. In other words, I’d rather pay $900 for a repair to keep my trusty car on the road than buy something else for cheap that will likely leave me on the side of it. Plus, by fixing the car I own, I’m not tempted to buy something that’s worth far more than I can afford just to get a “reliable car”.

Now, what if the repair isn’t $900? What if the engine went out and it’s going to cost me $4,000 to repair my $800 car?

Now it’s time to move up in car…

Why?

Because I can buy something that’s 4-5x better for what it would cost me to fix up my piece of crap car. If the repair will cost enough to buy a better car instead, then yes, I’m going to sell my car (likely to the junk yard) and buy something better (with cash of course).

7) You really don’t need a car

Do you live in the big city? Or are you within just a couple miles of work and the grocery store? If someone stole your car tomorrow, how long would it take you to miss it? If the answer is “more than a couple weeks,” then it’s probably best if you sell your car.

With the costs of the:

car purchase,

insurance,

gas,

maintenance,

and parking…

…it would be way cheaper for you just to hop on the bus once in a while or grab a lift with Uber.

Should you sell your car? Well…if you really don’t need it, then I don’t see why not!

So pretty much…if you drive a boxy Mercedes SUV and you care about the environment…you should probably sell it immediately. The 12 miles per gallon are doing Mother Nature in faster than pretty much anything else out there…

So What’s the Verdict? Should You Sell Your Car?

Did your car fit the mold of any of the 8 reasons above?

It’s worth more than 25% of your annual salary

It’s keeping you from getting out of debt quickly

The payment is more than 10% of your take-home pay

The insurance costs are ridiculous

It keeps breaking down on you

You can buy a better car with the cost of repair than the one you own

You don’t really need a car

The car you’ve got is killing the planet

If you’re nodding your head to one of the above, then it’s time to ditch that car! Either it’s too expensive for you to get ahead financially, or it’s too much of a hunk-o-junk for you to keep around anymore.

So let’s be honest with yourself? What’s your answer once and for all? Should you sell your car?